State Officials Seek to Revisit Sports-Betting Arrangements

For the past four years, the campaign to legalize online sports betting has appeared all but unstoppable. In recent weeks, though, some of the momentum has slowed.

In New York, a powerful state lawmaker introduced legislation to restrict some of the promotions that gambling companies use to lure new bettors.

In Kansas, the governor, an enthusiastic backer of the state’s legalization of online sports betting earlier this year, said she was now seeking to revisit aspects of the law, citing its “unintended consequences.”

In Massachusetts, gambling regulators this week unexpectedly paused consideration of an application for a gambling license by the casino company Penn Entertainment because of concerns about its partnership with the controversy-courting media business Barstool Sports.

And at some universities, administrators and students voiced concern about deals the universities had struck to promote sports betting on campus.

The sentiment shifted after The New York Times published a series of articles last month that examined the explosion of sports betting nationwide since the Supreme Court overturned a federal law in 2018 that blocked most states from permitting such gambling. The articles detailed the aggressive lobbying used to get sports betting legalized in 31 states, the splintered regulatory system that now oversees the industry and the flood of marketing and promotion of sports betting on television, online and on campuses.

In Kansas, lobbyists for gambling companies and sports teams showered lawmakers with money and gifts. The lawmakers wrote legislation that granted the betting and sports industries a variety of lucrative goodies.

One provision set aside 80 percent of tax revenue from sports betting to pay for a possible professional sports stadium in Kansas. The provision was inserted at the last minute at the request of real estate developers who owned land near the site where the stadium would likely be built.

Governor Laura Kelly of Kansas, when asked about the article, said that she has begun talking with state lawmakers about ways to revise the sports-betting law. She said officials would focus on the stadium-financing provision.

“Governor Kelly agrees there are aspects of the sports-betting legislation that could be improved, including the stadium fund,” said Brianna Johnson, a spokeswoman for the governor.

Other Kansas lawmakers said they intended to introduce legislation to curb the flood of promotional bets that gambling companies use to attract customers. Kansas permitted such promotions — including offers of supposedly risk-free wagers — to be deducted from companies’ taxable revenue. The volume of the promotions has been so large that, as of October, some major sports-betting companies had not paid any taxes on mobile bets placed in the state.

“Why on earth are we incentivizing these free giveaways?” said Representative Paul Waggoner, Republican of Kansas, who said he was startled to learn from the articles that in the first two months of sports betting in Kansas, gambling companies handed out $43 million in tax-free bets. “I wish we would have known all this stuff” before lawmakers voted on the package in April, he said.

In New York, Senator Pete Harckham, a Democrat from Westchester County and the chairman of the Senate Committee on Alcoholism and Substance Abuse, introduced a bill on Nov. 30 that would require state gambling regulators to more closely oversee how companies use “free bets” to encourage customers to set up sports-betting accounts.

Mr. Harckham, who cited the reporting in The Times as a motivation for his bill, said in an interview that while he still supported legal sports betting, he viewed some of the industry’s promotions as predatory.

“You can’t turn on the radio or can’t turn on any sporting event without being inundated with offers of free bets,” Mr. Harckham said. He compared it to someone handing out free samples of cocaine to entice people to buy larger quantities and said the state should consider outlawing “free” sports bets, just as it prohibits promotions featuring free alcohol or marijuana.

One article also revealed that at least eight universities — including Michigan State University, Louisiana State University and University of Colorado, Boulder — have become partners with online sports-betting companies.

U.S. Senator Richard Blumenthal, Democrat of Connecticut, sent a letter to Caesars Sportsbook, which signed deals with two of the universities, urging it to terminate the agreements. He also asked the American Gaming Association to address questions about the contracts.

“This potentially addictive activity, aimed at young people, some of whom are not of legal age to participate, is unconscionable,” Mr. Blumenthal wrote in his letter to Caesars. “Young people should not be targeted by sports-wagering advertisements, and Caesars’ deliberate marketing towards college-aged students cannot continue.”

Executives at Caesars did not respond to requests for comment.

After publication of the articles, some sports-betting companies like FanDuel and BetMGM said they have avoided such promotional agreements.

“The direct involvement of our industry with universities is kind of a no-fly zone for us,” Matt Prevost, an executive at BetMGM, said at a conference late last month. “We just don’t think seeing our brand presented on a perimeter board in a college basketball game where a quarter of the fans are underage is a good look for the brand.”

Officials at some universities are now debating the wisdom of having struck the deals.

At Michigan State, which was offered as much as $8.4 million for a five-year deal with Caesars to promote gambling on campus, a council of faculty, administrators and students met this week and discussed whether to recommend that the university form an ethics board to evaluate such partnerships in the future.

“It kind of puts M.S.U. in a very poor light and basically argues that M.S.U. is actively promoting gambling to students,” Satish Joshi, an environmental economics professor who is a member of M.S.U.’s University Council, said at the meeting.

Teresa Woodruff, the interim president at Michigan State, said during the council’s meeting that she was already reviewing the deal. “I’m working to understand the way in which these contracts work,” she said. “I do understand that this is a very fast-evolving environment that has been presented to universities like M.S.U.”

In Massachusetts, where legal sports betting is poised to get underway in early 2023, gambling regulators took the unexpected step on Tuesday of deferring a vote on whether to allow one of Penn Entertainment’s casinos in the state to offer sports betting using the Barstool Sportsbook brand.

The sticking point was Penn’s relationship with Barstool and its founder, David S. Portnoy. State gambling commissioners pointed to reporting in The Times that described Mr. Portnoy’s history of racist and misogynistic behavior and reported that, even as he has become one of the loudest promoters of gambling, he rarely if ever mentioned that he had previously filed for bankruptcy protection after racking up debts and gambling losses.

Commissioner Eileen O’Brien cited an example from the article in which Mr. Portnoy was recently in Knoxville, Tenn., for a University of Tennessee football game. He sat on an outdoor stage alongside other Barstool personalities with cans of High Noon, a vodka drink that he and Barstool are paid to promote. In front of a crowd of cheering fans in University of Tennessee gear, Mr. Portnoy shared his latest wager: $100,000 on the University of Georgia to win the college football championship.

The incident troubled members of the commission. They noted that Penn Entertainment had agreed to adhere to an American Gaming Association policy against encouraging sports betting among underage people.

“I’m disturbed by that,” Ms. O’Brien said.

Christopher Soriano, the chief compliance officer at Penn, said that the event was part of Barstool’s “College Football Show” but not directly linked to its sports-betting operation. “It was certainly not anyone’s intent to target a college campus and underage bettors,” he said. (Barstool personalities regularly discuss betting on the football show.)

Cathy Judd-Stein, the chairwoman of the state commission, said that Barstool and Mr. Portnoy’s marketing tactics aimed at young people did not appear to be consistent with the responsible-gambling practices that Penn Entertainment described in its sports-betting application to the state.

“Are we being genuine here?” Ms. Judd-Stein asked, comparing Penn’s statements to the gambling commission with the practices described in the articles.

She added, “We have an obligation to reconcile what is very available publicly, as to Barstool and really the significant personality attached to Barstool, and what we’re going to do about it, as we think about this application.”

The commission had been expected to approve the application, but it decided to put off the decision so it could examine these questions more thoroughly. Regulators are expected to meet next week to continue discussing Penn’s application.

Anna Betts, Andrew Little, Elizabeth Chrissa Sander and Alexandra Tremayne-Pengelly contributed reporting.